(Bloomberg) — Credit Suisse Group AG said it is adopting a new plan to fix “material weaknesses” in its reporting and control processes, prompted by concerns raised by US regulators over the past two years. The week following a new review of its financial statements.
Read the most from Bloomberg
For 2021 and 2022, “the group’s internal controls over financial reporting were not effective,” Credit Suisse said in its annual report released on Tuesday. “Management has also accordingly concluded that our disclosure controls and procedures were not effective.” The bank said that the material weaknesses that have been identified relate to the failure to design and maintain effective risk assessments in its financial statements.
The re-evaluation of the bank’s internal controls comes in parallel with an “unfavorable opinion” issued by accountancy firm PwC on the effectiveness of the group’s internal controls. The bank said that, nevertheless, its statements for the years 2022, 2021 present its financial position “substantially”.
Credit Suisse was forced to delay the release of its annual report from last week after the Securities and Exchange Commission raised last-minute questions on its 2019 and 2020 cash-flow statements, which the bank said That discussion is now over. Chief Executive Officer Ulrich Koerner is attempting to steer the bank through a complex restructuring to return to profitability, a process now at risk of being mired in a wider financial sector selloff involving US lender Silicon Valley Bank.
Read more: Credit Suisse shares fall after SEC query delays annual report
The announcement came as concerns about stress in the banking sector spurred a jump in government bonds and boosted demand for shelter assets. The US Treasury two-year note yield fell 15 basis points to 3.82% after earlier climbing 4.19%. Futures on the S&P 500 index gained 0.6%. Shares of Credit Suisse fell nearly 10% on Monday.
The bank said material weaknesses played a part in the revisions it made a year ago to the last few years’ statements. Credit Suisse said its efforts to resolve the issue “may require us to expend significant resources to correct material weaknesses or deficiencies.”
In 2021, Credit Suisse faced a multibillion-dollar hit involving ArcGos Capital Management, the family office linked to investor Bill Hwang. It later issued a report identifying procedural deficiencies that led to the debacle. The bank has also completely reshuffled the top management since then and is on its second reboot plan in as many years.
fee waiver
In a compensation report released on Tuesday, the bank said Chairman Axel Lehmann was to forfeit 1.5 million Swiss francs ($1.6 million) in pay for his first full year on the job, following the lender’s worst annual performance since the 2008 financial crisis. have been
Lehman, who takes up the role in January 2022, will not receive the standard fee typically paid on top of board members’ salaries, according to the bank’s compensation report published Tuesday after several days of delay. Happened due to last minute enquiry. US regulator.
Lehmann was allocated compensation of 3 million francs for the period from April 2022 to April 2023, and plans to propose a total pay take-up of 3.8 million francs for the following pay periods at the annual shareholder meeting. The bank also plans to increase the portion of the chairman’s compensation that is paid in shares from 33% to 50%.
In waiving its fees, Lehman reflected executive board members who were not receiving bonuses for the past year, when the lender faced a record outflow of client funds and raised shares amid concerns over its restructuring plans. Price declined. The bank nearly halved its 2022 pool for all employees, setting aside just 1 billion francs, down from 2 billion francs last year.
Koerner’s total compensation for 2022 totaled 2.5 million Swiss francs, which included a period as an executive board member prior to becoming CEO.
– With assistance from Paul Dobson.
(Updated with markets in fifth paragraph)
Read the most from Bloomberg Businessweek
©2023 Bloomberg L.P.